LNG | Northwest Coast Energy News

Second floating LNG terminal eyed for Kitimat at Douglas Channel log sort

A second floating liquified natural gas terminal may be planned for Kitimat, Northwest Coast Energy News has learned.

According to multiple sources in Kitimat, Altagas, the parent company of Pacific Northern Gas plans the terminal at the old log sort site on Douglas Channel, where the barge carrying the liquifaction equipment would likely be moored next door to the already planned BC LNG/Douglas Channel Partners LNG project which would be served by gas delivered by the PNG pipeline system.

Pacific Northern Gas has filed an application with the BC Environmental Assessment Office to construct and operate an approximately 525 kilometre, 610 millimetre (24 inch) diameter natural gas pipeline from the natural gas hub at Summit Lake, near Prince George, to Kitimat that would loop or twin the existing PNG existing natural gas pipeline.

The application to the BCEAO says: “The proposed Project would supply natural gas to proposed liquefied natural gas (LNG) export facilities as well as the Proponent’s existing customers. The proposed Project would include the replacement of four existing compressor stations and would have an initial capacity of 600 million standard cubic feet per day.”

PNG Open House — PNG Pipeline Looping Project Open House at Tamitik. Nov. 26, 2013. (Robin Rowland/Northwest Coast Energy News)

On Tuesday, November 26, Pacific Northern Gas held a sparsely attended open house at Tamitik Arena as part of the BCEAO public comment procedure.

A 38 day public comment period on the application information requirements started on November 25 and will end on January 2, 2014.

At the open house, PNG officials explained that “looping” means that there would be a second or twin pipeline that would mostly be on a parallel route to the existing pipeline. Since both pipelines would begin at the Summit Lake terminal and end at the Kitimat terminal that is where the term “looping” comes in.

The PNG officials said that the pipeline was initially designed to service the first floating LNG terminal at the old log sort site on Douglas Channel south of Kitimat, but north of the KM LNG site at Bish Cove.

It would be operated by BC LNG Energy Cooperative, through Douglas Channel Energy Partnership, a partnership with the Haisla Nation and LNG Partners, the energy investors mainly from Texas,

Unlike the bigger project Kitimat LNG or KM LNG, a partnership between Chevron and Apache (and according to reports possibly Sinopec) or the Shell-led partnership LNG Canada, the BC LNG project would allow smaller companies to provide LNG to Asian customers.

At the open house, the PNG officials said the two pipelines could also service “another Kitimat floating LNG project” but declined to give details for confidentiality reasons. The same officials also said the proponent of that project was also looking at Prince Rupert as a possible site for the second floating terminal.

Kitimat sources have confirmed that AltaGas has told them that the company is also considering Prince Rupert as a site for a floating LNG terminal.

However, the current documentation and maps filed with the BCEAO show the PNG looping pipeline terminating at Kitimat, not Prince Rupert.

PNG pipeline map — Detail of the PNG Pipeline Looping proposal. The existing pipeline is shown at the dashed line, the new pipeline is shown in purple. (PNG)

According to the maps filed with the BCEAO and made available at the open house, the new pipeline would not be twinned completely along the existing route across the mountains west of Smithers to Terrace, but would head north at Telkwa parallel to Highway 16 before making its own way through the mountains, crossing the existing pipeline at the Zymoetz River east of Terrace and then taking a westerly route toward Lakelese Lake before joining the existing pipeline corridor along Highway 37.
AltaGas took over Pacific Northern Gas in the fall of 2011.

The Texas-based arm of Douglas Channel Energy partnership, LNG Partners, is currently in financial difficulty. Reports say that the Texas investors in the company are having difficulty repaying a $22.5 million loan from China’s ENN Group.

The problems currently faced by the Texas group have no affect, at this point, on the Haisla Nation investment in the BC LNG Energy Cooperative. There is already speculation in Kitimat that if the LNG Partners get into further financial difficulty, AltaGas may step in and take over. The would raise the question whether or not there would still be two floating LNG terminals on Douglas Channel, or just the one, as originally planned, but under new ownership.

In it’s project proposal PNG says

The Project will generate approximately 1800-2400 direct person years of employment during construction. Additionally, tax benefits will be generated for Kitimat and the regional districts crossed by the pipeline. PNG anticipates the project will also result in a significant reduction in natural gas transportation rates for its existing customers.

Natural gas transportation costs are a major issue in the northwest, for those costs appear to keep going up while the price of natural gas in North America is generally going down. Natural gas transportation costs in Kitimat spiked after the closure of the Methanex plant and have continued to be quite high, which is just one of the increasing burdens for residents of Kitimat on fixed or low incomes, who are not benefiting as others from the current boom town economy.

Another problem facing PNG is that the new pipeline will cross the traditional territory of the Wet’suwet’en First Nation, where one house, the Unist’ot’en oppose both the Northern Gateway and Pacific Trails Pipeline and have set up a blockade camp on access roads.

The PNG filing with the BCEAO promises consultation with both the Wet’suwet’en Council, and the Office of the Wet’suwet’en, which represents the hereditary chiefs and matriarchs, as well as other First Nations along the proposed route.

PNG Open houses for the project are scheduled for:

Vanderhoof
Friendship Centre Hall
Thursday, November 28, 2013

Terrace
Best Western Inn
Monday, December 2, 2013

Smithers
Hudson Bay Lodge
Tuesday, December 3, 2013

Burns Lake
Chamber of Commerce
Wednesday, December 4, 2013

Summit Lake
Community Hall
Thursday, December 5, 2013

Sinopec in talks to buy into Kitimat LNG Wall Street Journal says

The Wall Street Journal is quoting sources that Sinopec, China’s largest petroleum refining company, “is in early talks with U.S.-based oil-and-gas producer Apache to buy a minority stake in a liquefied natural gas project on Canada’s Pacific coast.” And since Apache is a partner with Chevron in KM LNG, that means the project commonly known as Kitimat LNG.

Wall Street Journal story (subscription required)

Costs rising

Sinopec is looking at several of the at least 13 LNG projects in the northwest BC region. The reports say that Sinopec management has not yet signed off any investment and say that any Sinopec investment would go toward the rising costs of the KM LNG project’s costs, which Apache now estimate will be about $15 billion US.

“Apache is moving forward with the project, and we’re looking for partners,” says an Apache spokesman, according to the reports. It appears that Apache is once again recalculating the cost of the Kitimat project.

Sinopec, the China Petroleum and Chemical Corporation is the world’s fifth largest company by revenue. It has a $4.65 billion stake in the bitumen sands giant Syncrude and owns the Canadian energy company Sinopec Daylight Energy Ltd through Sinopec Canada.

It was a Sinopec pipeline that exploded in Qindao in Eastern China, killing 55 people on Friday, as well as spilling oil into the nearby sea.

Ellis Ross posts development philosophy on Facebook

Haisla Chief Counsellor Ellis Ross has posted a statement on Facebook, outlining his philosophy on energy development.

Haisla Nation Chief Counsellor Ellis Ross at Bish Cove, June 19, 2013. (Robin Rowland/Northwest Coast Energy News)

In 2003 I was first elected to Haisla Nation Council, and I was intent on opposing just about every economic development project coming our way, from fish farms to natural gas. Fortunately experienced councilors suggested that before I took any hard and fast positions that I consider unbiased facts and the community’s social situation.

It didn’t take long before the full extent of our community’s problems hit home, angering and saddening me at the same time. Before my political career I was one of those who applauded political speeches on unemployment, poverty, independence, and the relationship between First Nations and the Crown. But it was now clear that 30 years of speeches and government programs had changed nothing for the average Haisla person who just wanted a job. Unemployment was still at 60 per cent, housing was based on hand-outs from Ottawa, and, worst of all, substance abuse and suicides were commonplace and were destroying our people’s hopes for a brighter future.

I was fortunate to have found work outside of my reserve for most of my adult life but there are only so many jobs in depressed economies and the long term jobs were kept out of our reach by organizations associated with the corporations set up in our territory. The result was our young men and women either had to leave home for employment or stay home and accept seasonal work (UIC) or welfare. Leaving ancestral homes is a hard decision for First Nations to make. The land is connected to our protocols, our culture and to our past.

Many reasons have contributed to the demise of our peoples and communities but perhaps the foremost is the culture of dependence. Dependance in our case was from the top down; from council dependant on government funding to the individual band member being dependant on council or welfare. Our people are not lazy. The culture that preceded the non haisla culture was one of hard work to bring in food, resources and wealth. That culture has not merged so well with non haisla culture but our work ethic is the same as the non haisla culture.

If poverty is the only lifestyle you know, it is very difficult to know there is a way out, much less thinking of a way to get out of it. The individual band member that is watching development in their territory and watching the wealth being generated without having an opportunity to be a part of it is going to have resentment.

Those Nations which are succeeding — strong employment levels, healthy communities, few social ills — appear to have gained a level of independence and have done it mostly through economic development. The newer discussions are those concerning shiftwork, double time, new bosses and how paychecks will go towards the next hunting trip or holidays to vancouver or elsewhere.

We have many proposals put in front of us now that we have to sift through. When we look at these proposals we have to find accurate information in terms of impacts, benefits and feasibility. Sub topics can be right of ways, fracking, logging practices, financing, permitting, corporate structures, emissions, land ownership and the list goes on and on. We do have to consider the future but we also have to consider the present and the situation we know that our membership is in and try to put them in a position where they can help themselves.

So far, the outlook has been positive. Our people have jobs. They have hope. They are confident about their futures. The despair that comes with poverty is slowly disappearing but we have more work to do to ensure their confidence can be sustained. We know that to become a strong independent Nation, we need to have strong independent members.

We will continue to look at the contentious issues that are in front of us and will try as much as we can to resolve with both the crown and the proponent but we cant lose sight of one of the biggest reasons of why we’re doing what we do. Our members need a future.

By the way, the work we have done to date has not only assisted our members but has assisted the region and non Haislas in ways that we have not yet even started to measure yet.
Ross.

Ross later posed two comments:

Ellis Ross: got some good feedback on this but also got feedback that it was unclear on the point I was trying to make so I rewrote it. the point was in light of all the issues we have to look at, we can’t lose sight of the social factor in that some Haislas (and non Haislas) deserve the employment/contract opportunity that comes with proposed projects.

Ellis Ross: fracking, emissions, land ownership, etc… are issues that are extremely important but our people living in poverty with no hope is also an extremely important issue.

Long term sustainability of shale energy in doubt, scientists tell geology conference

Shale oil and gas may not be the economic “panacea” that some believe, a panel of scientists told a geology conference today. New studies point to higher than expected field decline rates and increasing costs to extract the energy, meaning the long-term sustainability of shale gas production is questionable.

The findings confirm what sources in the energy industry have been telling Northwest Coast Energy News for the past few months, that the output from hydraulic fracturing decreases much more quickly than conventional extraction.

The panel of three scientists released their findings at the annual convention of the Geological Society of America this morning in Boulder, Colorado.

The studies concentrate on the United States where fracking for “tight oil” and natural gas is more advanced than in Canada.

The panel says that while the use of hydraulic fracturing and horizontal drilling for “tight oil” is an important contributor to Amercian energy supply, fracking will not result in long-term sustainable production or allow the U.S. to become a net oil exporter.

Charles A.S. Hall, professor emeritus at the College of Environmental Science and Forestry, State University of New York, Syracuse, presented two studies: one of the global patterns of fossil-fuel production in the past decade, and the other of oil production patterns from the Bakken Field (the giant expanse of oil-bearing shale rock underneath North Dakota and Montana that is being produced using hydraulic fracturing).

According to a news release from the GSA, both studies show that despite a tripling of prices and of expenditures for oil exploration and development, the production of nearly all countries has been stagnant at best and more commonly is declining — and that prices do not allow for any growth in most economies.

“The many trends of declining EROIs suggest that depletion and increased exploitation rates are trumping new technological developments,” Hall said.

The second studies are from J. David Hughes, president of Vancouver-based Global Sustainability Research Inc. Hughes studied the Bakken Field and the Eagle Ford Field of Texas, which together comprise more than half of U.S. tight oil production. The results show that drilling must continue at high levels, to overcome field decline rates of 40 percent per year.

Drilling rates of more than 3,000 wells annually in the Eagle Ford, and more than 1,800 wells annually in the Bakken, are sufficient to offset field decline and grow production — for now. If drilling at these high rates is maintained, production will continue to grow in both fields for a few more years until field decline balances new production. At that point drilling rates will have to increase as “sweet spots” (relatively small high-productivity portions of the total play area) are exhausted and drilling moves into lower-productivity regions, in order to further grow or even maintain production.

The onset of production decline will likely begin before the end of the decade, Hughes said.

“These sweet spots yield the high early production observed in these plays, but the steep decline rates inevitably take their toll. ”

Arthur E. Berman, a geological consultant for Labyrinth Consulting Services, Inc., of Sugar Land, Texas, deems the U.S. 10-year history of shale-gas extraction “a commercial failure. ” However, he says, this will not be the case forever. “Prices will increase to, at least, meet the marginal cost of production. More responsible companies will dominate and prosper as the U.S. gas market re-balances and weaker players disappear.”

Hughes sums up: “Tight oil is an important contributor to the U.S. energy supply, but its long-term sustainability is questionable. It should be not be viewed as a panacea for business as usual in future U.S. energy security planning.”

KOGAS selling stake in Kitimat’s LNG Canada

Reuters is reporting that the Korean Gas Corp is selling part of its stake in the Shell-led LNG Canada project in Kitimat.

Reuters says KOGAS CEO Jang Seok-hyo told the World Energy Congress that the company is considering selling 5 to 10 per cent of its stake in the LNG Canada project. It currently holds 20 per cent.

The sale is apparently an effort to improve the company’s bottom line. The South Korean government recently began a review of state-owned oil and gas investments with are suffering from poor profits.

Kogas, which is the world’s largest corporate buyer of LNG, is also considering selling part of its 15 per cent holding in the $18.5 billion Gladstone LNG (GLNG) project in Australia.

Check out Kitimat’s LNG competition

Screen grab American Petroleum Institute interactive map of LNG export projects. (API)

The American Petroleum Institute, the lobby group for US energy companies has launched an interactive map on its website covering liquefied natural gas export projects.

The API says the U.S. Department of Energy has approved only four applications for permits to export liquefied natural gas nations that don’t have a free trader agreement with the US, adding: “There are currently 21 pending applications, covering 18 discrete facilities where U.S. businesses are seeking to build and operate terminals to process LNG for sales abroad.”

API interactive LNG export map
(requires Flash, may be slow loading)

While the map does show proposed projects at Kitimat and Prince Rupert, the “interactivity” does not give details, while there is detailed information on the US projects including “anticipated capital investments, jobs, and export volumes associated with each U.S. site, as well an estimated value of potential exports.”

One of the Kitimat LNG projects plans to self-generate power for liquefaction plant

At least one of the two large liquified natural gas projects in Kitimat is, at least at this point, planning to self-generate the power required using a gas-fired, steam-driven electrical generation system.

A job ad posted this weekend by the headhunting firm Fircroft is seeking a Lead Project Engineer, Power Plant for “Our client, a major international owner/operating company, requires expertise for their LNG mega-project in Western Canada.”

The job, which requires 20 years and more experience, would be located in Calgary for eighteen months, then move to Kitimat for the remainder of a four year contract paying from $1650 to $1850 per day.

By Fircroft describing the job as a “mega-project” means that the client is either Shell’s LNG Canada project or the Chevron and Apache KM LNG project, since the much smaller BC LNG project could not be described as a “mega-project.”

As well as the standard qualifications for a senior engineer, the job posting lists:

• Power Plant design, operation and construction experience required.
• Boiler design, construction, operation, and commissioning experience required.
• Heat Recovery Steam Generation (HRSG) design, processes, construction, operation, and commissioning experience required.
• Integrates inherent safety in design and operability in concept selection and development for gas resource opportunities.

Providing the power for the Kitimat and other northwestern LNG projects is becoming controversial. The power is needed to cool the natural gas so it can be loaded onto tankers for shipment to customers.

The BC government recently announced a $650,000 study of the cumulative effect on air quality for the planned industrial expansion in the Kitimat area, including the Rio Tinto Alcan Kitimat modernization project, which would increase the amount of sulphur dioxide emissions, combined with as many as three LNG projects and the associated increase in tanker traffic, as well as the possible and even more controversial Enbridge Northern Gateway project.

At the time of the BC announcement, the Globe and Mail reported:

If natural gas is used either for direct-drive or combined-cycle electricity generation to produce the energy required for the proposed Shell LNG facility at Kitimat, approximately 300 million cubic feet of natural gas would be burned. The proposed Chevron Apache LNG facility could burn approximately 140 million cubic feet of natural gas.

The other alternative for powering the LNG plants is to use hydro-electricity, and BC Hydro at the moment doesn’t have the capacity to supply the LNG projects with power. One possibility is the controversial Site C dam project in the Peace River basin, which is also under review by the BC government.

Although the job is restricted to Canadian citizens or permanent residents, it is clear that the engineer will have to also answer to the project’s overseas partners since one requirement is to conduct: “Overseas VIP workshops, including Value Engineering, Process Simplification, Process Optimization and Design to Capacity.”

Clio Bay: Clay capping “relatively new technique”: DFO statement

Carrie Mishima, a communications advisor for the Department of Fisheries and Oceans sent this statement in response to questions from Northwest Coast Energy News:

· The proposal by the Kitimat LNG project uses a relatively new technique that is expected to improve aquatic habitat in Clio Bay. The bay has been used as a log handling site for decades, resulting in areas of degraded habitat from woody debris on the seafloor. The project will cap impacted areas with inert material to restore the seafloor.

· Capping at smaller-scale sites in Canada has shown that the technique has successfully restored low-value aquatic habitat.

· The project will implement standard and project-specific measures to protect fish and aquatic habitat and will conduct a five-year monitoring program to determine how well the habitat is recovering.

· Data from the monitoring program will be used to guide future habitat reclamation at impacted habitat sites. Reference sites are being established as benchmarks against which the capped sites can be measured.

· Site-specific standards for dissolved oxygen levels will be developed for the enhanced site by sampling a control site having similar habitat parameters.

· Detailed mapping has been done to identify the best areas for the soil placement and to protect sensitive habitat such as intertidal areas, rocky substrates and eelgrass beds.
· Other required mitigation measures will include analyzing the cap material to confirm it is free of contaminants and placing this material during appropriate tidal conditions to ensure accurate placement of the cap in accordance with design plans.

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LNG, Clio Bay construction superintendent contract position posted on job sites

A job for a “construction area superintendent” for both the Kitimat LNG plant and the Clio Bay restoration appeared on job sites in the world wide web on October 1. The posting expires on December 31.

The job was originally posted by Brunel Energy, a consulting firm that describes itself as a company that “provides specialist personnel to the international oil & gas, petrochemical, power generation and construction industries.”

The contract job, which, requires 20 years experience and will pay between $1,500 and $2,500 a day, calls for someone who would be “developing project level execution plans for EW&I, LNG Plant & Clio Bay restoration program, and implement/control against these plans in accordance with Project Management System (PMS) processes, procedures and standards.” That superintendent will eventually turn over “functioning facilities to LNG Plant or operations staff.”

As well as standard requirements for a giant construction job of this nature, the requirements include:

• Represent the Company in all interfaces with BC and Kitimat agency associated with EW&I construction activity. Maintaining a positive relationship with the agency by conforming to all regulations and resolving areas of uncertainty in a mutually agreeable manner.
• Maintaining positive relations with the First Nations Haisla representative, recognizing them as a partner and owner of the overall Kitimat LNG Project Development.

Chevron and Apache are partners in the development of the KM LNG project at Bish Cove.

Chevron posts senior LNG jobs at Kitimat

Chevron posted a series of senior LNG jobs at Kitimat on its job website on Monday.

The jobs include: